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Learn about the main strategies used by investors to gain additional gains with FIIs
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- In December 2020, the segment registered 3.73 million shareholders. This represents an increase of 91.7% over the previous year
- With this great adhesion, there was also an increase in the average daily traded volume, which reached R$207.9 million last year
- But it is necessary to know the main techniques to profit more from Real Estate Funds to understand their risks and advantages
Also, read How to choose a safe and profitable investment?
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The industry of real Estate Funds (FIIs)has been growing rapidly. In December 2020, the sector registered 3.73 million shareholders, an increase of 91.7% over the previous year, according to a survey by Economica, based on data from B3
With this large influx of investors, the average daily traded volume also increased, which reached BRL 207.9 million last year — which guarantees the liquidity of the papers in the secondary market, opening the possibility for investors to adopt additional earnings strategies with real estate funds.
Learn about the main techniques to profit more from Real Estate Funds, as well as their advantages and risks.
1. Arbitration of Real Estate Funds
Arbitrage is a strategy that takes advantage of the difference between the price of the subscription offer for a Real Estate Fund quota and its quotation in the secondary market. As the value per share in the offer is usually lower than the value practiced over the counter, the investor can increase his participation in the fund with the difference in quotations.
The method is more suitable for investors with a consolidated position in the FII and who have average share prices with the possibility of some profit. For the “early position” investor, the strategy makes little sense. The technique allows the investor to produce additional gains with the REITs and reduce the implicit costs of the offers.
The arbitration takes place in the first subscription stage when the investor sells a position after the reporting date. After calculating the 20% income tax due on the income, the remaining funds can be used to repurchase the shares at a lower price.
The investor can carry out the arbitration in full when he decides to trade with all his shares available, or in part, in case only part of the shares are arbitrated. The transaction’s net profit is calculated as the difference between the sale value of the initial amount, net income tax, and the repurchase price.
The strategy is only advantageous when the issue price is far below the market price. Due to income tax and the delay in receiving subscribed shares (which can take two months), subtle differences do not usually bring positive returns to investors and can generate losses.
2. FII flipping
Another way to make more money with real estate funds is flipping, which is a speculative strategy that consists of the advance purchase of shares of Real Estate Funds for later sale on an opening day. The expression comes from the English verb “to flip”, which means to turn or turn suddenly or suddenly.
The technique is adopted in the final phase of the issuance process when the newly issued shares are traded on the secondary market. The additional gain is possible, as generally, the issue price is lower than the trading value on the secondary market.
Thus, the investor can participate in the offer by acquiring shares at a lower price to sell them on the date of conversion at market value, pocketing the difference.
However, flipping involves risks. The receipt of subscribed shares takes, on average, between 45 and 60 days. During this period, market conditions can be very different from the time of issuance.
Thus, there is a possibility that the trading price of the shares is below the offer value and the operation may not be profitable. This can occur when the trading volume is insufficient to promote an appreciation of the shares.
In this case, the investor must reflect on whether it is convenient to sell the share below its issue price, assuming the loss, or wait for the share price to exceed the value to have gained.
Pre-flipping
The investor may also choose to sell the share before the base date of issue and even before the announcement of the subscription offer. This strategy called pre-flipping is derived from the prior technique.
The method takes advantage of a common movement of the falling price of shares in the secondary market, after the base date of an offer, to carry out the sale before an eventual devaluation.
This happens because there is a quotation adjustment by B3 after the subscription, which can also be caused by the action of market agents that may be making sales and pushing the price down in the secondary market.
However, the transaction may be frustrated if the issue is canceled or extended, leaving the investor without a position in the Real Estate Fund, as well as unable to repurchase the asset for the price paid before.
3. Rent of shares
In November 2020, B3 started to allow the rental of shares of Real Estate Funds, an operation that is well known in the stock market. This opened up the possibility of new strategies to earn more with Real Estate Funds.
Investors who bet on a devaluation can rent shares to sell them in the secondary market, in a strategy known as short operation, in other words, selling short. When the quote drops, the quote can be repurchased to return to the owner. The difference between the high sell price and the low repurchase value is the profit made by the strategy.
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There are also some derivations of the share rental method. In open arbitration, the investor rents a share sells on the secondary after the base date of an issue buys it via subscription, and returns it to the owner when the shares are paid up. In short pre flipping, the investor borrows the share, sells it before the base date, buys it on the cheaper secondary, and returns it to the donor.
The main risk of this additional earnings strategy with real estate funds is the unpredictability of future market movements. After the sale of the asset, the share may not depreciate until the end of the lease, generating losses for the investor.
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